What is dumping: useful to know

Among the basic concepts that determine financial literacy, it is useful for any modern person to know what dumping is. Let's trace a little history of the definition. This concept has its roots in the last decades of the nineteenth century and the beginning of the twentieth. It was then, during the first monopolization of European and American markets, the concept of dumping was born. The very definition comes from the English word dumping, that is, a reset. And what is Dumping prices? Accordingly, this decrease in the requested remuneration for the goods sold. Moreover, this is an intentional operation of the selling side. Price dumping involves a conscious understatement of prices in comparison with the prices for a similar product from competitors. At first glance this may seem absurd. Why would someone voluntarily give up profits? However, on closer examination, price dumping is a very effective tool in the competition for markets. And it's useful to note that, like a hundred years ago, now it is used mainly by large players in the commodity market, which have substantial financial capabilities. This is logical, because only having such a margin of safety, you can work without getting a profit, or even at all a loss. Such operations are carried out for a number of reasons.

First, it is penetration into new markets with the involvement of the buyer at a low price. Quite often, this is accompanied by a concomitant loss of competitors from small and medium-sized businesses, who lose their client base and are unable to stay afloat for a considerable time, since they do not have such a financial foundation as large corporations. Actually, the last thesis basically demonstrates what dumping is. Thus, if the margin for the goods is very small, then such a new player in the market receives his income not so much from the mark-up, but from a large number of units sold. If the company worked at a loss, then after a certain period of promotion, prices return to the level necessary to ensure profit. At the same time, a literally habituated consumer audience retains its tastes, and there is no mass outflow. That is, dumping is widely used not only to promote new brands, but also certain new products.

Speaking of what dumping is, one should also mention that in a number of cases it is extremely harmful to the national economies of many states. For the natural reason that the strangulation of competition in the economy contributes to Inhibition of its development. In this regard, the code of the World Trade Organization prohibits the policy of dumping prices adopted at the international conference in 1967. Then, in the mid-sixties, it was caused by the problem of filling European markets with cheap Japanese and Korean cars and electronics. However, this problem is actual and now. Only the place of the Far Eastern tigers today was occupied by China.